Awards: Horatio Alger Award of the Horatio Alger Association, 1998;
William Booth Award, Salvation Army, 1998; Distinguished Service Citation,
National Conference for Community and Justice, 2000; Greater Cincinnati
and Northern Kentucky Business Hall of Fame, 2001.

Publications:
Inequality: The Poor and the Rich in America
(with Joseph W. McGuire), 1969;
Creativity and Innovation in Manpower Research and Action Programs,
1970;
Contemporary Management: Issues and Viewpoints
, 1973;
Institutional Issues in Public Accounting
, 1974;
Ethics, Free Enterprise, and Public Policy: Original Essays on Moral
Issues in Business
, 1978;
Co-Creation and Capitalism: John Paul II's Laborem Exercens
, 1983.

■ As CEO and chairman of the Kroger Company, Joseph A. Pichler
maintained Kroger's position as the nation's number one
grocery store chain, despite increasingly fierce competition from discount
superstores. He expanded Kroger's product line

Joseph A. Pichler.

AP/Wide World Photos

.

and services. His many acquisitions included Fred Meyer, a West Coast
chain of grocery and general merchandise stores. As president and COO in
the late 1980s, Pichler formulated and implemented strategies to protect
Kroger from hostile takeovers by corporate raiders. Unlike most
supermarket executives, Pichler did not work his way up in the business.
Rather he earned a PhD in business and spent 15 productive years in
academia, including six years as dean of the University of Kansas School
of Business. Pichler was a financial expert and a proponent of long-range
planning.

ENTERED BUSINESS VIA ACADEMIA

Pichler was born in St. Louis, Missouri, on October 2, 1939. He earned a
bachelor's degree in business from the University of Notre Dame in
Indiana and a master's degree in
business administration from the University of Chicago. While finishing
his PhD at the University of Chicago, Pichler worked as an assistant
professor at the University of Kansas School of Business. He was awarded a
Woodrow Wilson fellowship, a Ford Foundation fellowship, and a Standard
Oil Industrial Relations fellowship. Between 1968 and 1970 he also served
as a special assistant to the U.S. Labor Department's assistant
secretary for manpower. He was chairman of the Kansas Manpower Services
Council from 1974 until 1978.

Prior to becoming a business leader, Pichler worked his way up the
academic ladder at the University of Kansas. He became dean of the
business school in 1974. His research focused on various issues, including
studies of the adjustments made by laid-off workers following plant
closures. Pichler authored numerous articles for professional journals and
wrote and edited several books on business topics.

While still at the University of Kansas, Pichler joined the board of
directors of the Dillon Companies of Hutchinson, Kansas, an operation that
included grocery and convenience stores as well as manufacturing
facilities. He left the University of Kansas in 1980 to become executive
vice president and later president of Dillon. When the Kroger Company
acquired the Dillon Companies in 1985, Pichler became an executive vice
president of Kroger, which was based in Cincinnati, Ohio. He became
president and COO in 1986, when his predecessor left because of
long-standing disagreements with Chairman Lyle Everingham over the company
management.

Founded in Cincinnati by Barney Kroger in 1883, the Kroger Company had
become the largest retail food chain in the United States, with about
3,500 stores. Neighborhood Kroger supermarkets were so ubiquitous in the
Midwest that "Krogering" came to mean grocery shopping at
any food store. Neighborhood Kroger stores depended on the loyalty of
their customers, who generally came from within a 2.5-mile radius of the
store. Kroger store careers often lasted 40 years.

LEVERAGED KROGER TO THWART CORPORATE RAIDERS

It was a scary time at Kroger. Corporate raiders were going after
chain-store companies, and Kroger was seen as a prime target. First the
Dart Group drugstore chain and then Kohlberg Kravis Roberts &
Company attempted to buy it out.

In 1986, in response to the possibility of a hostile takeover, Pichler and
Everingham undertook a major restructuring of Kroger. They sold off the
company's nonsupermarket assets and refocused and strengthened
local management, giving regional managers more independence. They also
stonewalled labor union demands and moved out of some areas in which labor
costs could not be kept down.

In response to the 1988 attempt by Kohlberg Kravis Roberts to buy out the
company for $4.64 billion, Pichler initiated an even bolder restructuring
and recapitalization plan in hopes of increasing Kroger's value.
Prices were slashed, store formats were updated, unprofitable stores were
closed, and many employees were laid off. Pichler's riskiest move
was to leverage the company by issuing $5.3 billion in junk bonds and
paying shareholders a onetime dividend of $40 per share.

Ultimately Pichler's strategy proved to be a major success, and he
was heralded as a corporate hero. Kroger became one of the very few
multiregional chains to survive the breakups of the 1980s. However, in the
process Kroger took on enormous amounts of debt. More than one-third of
companies that carried out leveraged recapitalizations between 1985 and
1989, borrowing against future earnings to pay a large, onetime
stockholder dividend, ended up defaulting on their debt.

FACED NEW COMPETITION

When Pichler became CEO of Kroger in 1990, the company was facing new
crises. Kroger's unionized stores were affected by labor strikes
and found it increasingly difficult to compete with Wal-Mart, Kmart, and
other nonunionized one-stop superstores. Furthermore, these warehouse
stores sold groceries at a loss, relying on higher-margin merchandise to
make up the difference, although the price wars started by the superstores
affected independent stores far more than Kroger.

In response to such competition, Pichler began to move Kroger toward a
combination store format, adding higher-end cosmetics and perfumes,
one-hour photo processing, video rentals, florists, bakeries, and delis.
In an interview with David Merrefield of
Supermarket News
(May 28, 1990), Pichler said, "We spend a lot of time trying to
read the tea leaves of lifestyle and demographic changes and asking
ourselves 'what are the implications of this in shopping patterns
and for consumer needs, and what departments do we need to develop and
grow?'"

However, Pichler relied primarily on customer loyalty to neighborhood
Kroger stores and committed the company to community relations. He
invested in older stores in poorer inner-city neighborhoods and became
involved with numerous local and national business initiatives for
education. Pichler created a program for Kroger employees to volunteer at
local schools. He told Michael Sansolo of
Progressive Grocer
in December 1991, "We, as an industry, are suited for this. We
have to deal with people. We have to motivate and educate. This industry
is so competitive that you can't afford to be arrogant or the
market would eat you. We are a service industry."

"CASH FLOW JOE"

Although under Pichler costs were controlled and Kroger gained market
share, its huge debt kept company profits at the
bottom. In order to compete with the increasing numbers of food clubs and
discount retailers, in 1992 Pichler announced major cost-cutting measures.

Pichler stressed efficiency but not efficiency at any cost. Instead he
tried to take full advantage of Kroger's size. He updated
Kroger's Peyton distribution center in Lexington, Kentucky. From
there, general merchandise, including drugs and seasonal
goods—among Kroger's fastest-growing product
lines—was distributed to all 1,263 Kroger stores nationwide.
Improved purchasing and distribution efficiency enabled Kroger's
multidepartment stores to decrease floor space while increasing sales.
Pichler invested heavily in information systems. Scanning technology at
receiving docks yielded huge savings in labor costs. Pichler made full use
of Kroger's manufacturing and food-processing plants to produce
more private-label goods, including health and beauty products, which
often could be sold for as much as 50 percent less than name brands.

By selling off stores and wholesale warehouses and postponing expansion,
Pichler saved the company $333 million. The strategy proved to be
fortunate since most of Kroger's competitors were overbuilding,
only to be hit with a recession. Pichler reduced Kroger's corporate
staff from 1,400 to four hundred and gave operating divisions more freedom
in merchandising, purchasing and pricing, advertising, and labor. In
addition, Pichler stood firm in the face of union demands. Productivity
enhancements cut $142 million per year from Kroger's operating
costs.

Above all, Pichler ordered managers to generate cash in every way
possible, and he became known in the industry as "Cash Flow
Joe." The plan worked. The increased cash flow, along with
declining interest rates, enabled Pichler to begin repaying the
company's debt and to increase stockholder dividends. The new cash
flow also enabled Pichler to open new stores and remodel older ones. By
1994 Kroger was increasing total store floor space by almost 5 percent per
year, up from 2.5 percent in previous years.

STRATEGY FOR GROWTH

In 1998 Pichler announced a major three-year growth plan. He invested in
new systems and technologies to reduce costs and operating expenses and
increase profits while allowing local managers enough flexibility to
compete with the super-stores. Pichler's plan included maintaining
a high level of investment in Kroger stores, opening new stores and
relocating, expanding, or remodeling older stores. Instead of moving into
new markets, new Kroger stores were added in existing markets, resulting
in more efficient distribution and advertising. With more stores in a
given locale, Kroger took customers away from its competitors rather than
from its existing stores.

Although Pichler centralized more of Kroger's purchasing and
increased its emphasis on national promotions, according to an April 1998
article by Steve Weinstein in
Progressive Grocer
, Pichler told a group of analysts, "We are not in the business of
buying centrally and telling our KMAs [Kroger marketing areas] what they
can sell. Rather, they have come to us and asked what we could do on
coordinating deals and street money."

Pichler's biggest acquisition came in 1999, when Kroger bought Fred
Meyer, a chain of multidepartment stores based in Portland, Oregon.
Kroger—which had briefly lost its position as the nation's
largest supermarket chain to Albertson's—regained its number
one spot. Kroger now had a total of 2,200 stores in 31 states, a 50
percent increase. It was first or second in market share in 33 of the
nation's largest markets. The Fred Meyer merger enabled Kroger to
move into major, fast-growing West Coast markets and greatly increased its
purchasing power.

Pichler and Fred Meyer CEO Robert Miller had been sharing ideas and
strategies for about five years prior to the acquisition. However, the
integration of Kroger and Fred Meyer was complicated because Fred Meyer
stores had a variety of different formats in different locations.
Nevertheless, the merger facilitated the addition of general merchandise
to many of Kroger's combination food and drug stores. Fred Meyer
also served as a springboard as Kroger began to launch its own multiformat
stores. More Kroger stores added photo processing services and pharmacies
as well as jewelry and clothing departments, bank branches, and gas pumps.
In turn Kroger provided Fred Meyer with manufacturing facilities for
private-label products.

MANAGEMENT STYLE

In May 1990 Pichler told Merrefield of
Supermarket News
, "I think management style should reflect the organization in
which the individual is operating … So Kroger operates with a great
deal of discussion…. Things happen as people agree, and then they
say: 'here we go.'"

Associates consistently described Pichler as a modest, low-key leader who
spoke simply and clearly and listened well. He carried on lengthy
conversations with customers while shopping at his neighborhood Kroger
store. He was known for his superb negotiating skills. As head of the
Cincinnati Business Committee, Pichler acted as a diplomatic mediator
between vying interests. He told Jennifer Bjorhus of the
Oregonian
(Portland), "As long as people keep eating chocolate chip cookies,
they all stay, and no one gets mad" (October 25, 1998).

As Pichler acquired other supermarket chains, he made relatively few
changes, maintaining local control. The chains usually continued to
operate under their own names. Kroger developed positive employee
relationships by paying union wages with good benefits. Under Pichler,
Kroger had a reputation as a good corporate citizen with strong community
ties.

COMMUNITY INVOLVEMENT

Pichler was known for his civic involvement. Between 1983 and 1996 he
served on the national board of directors of Boys Hope. Pichler was a
member of the fellowship advisory committee of the Woodrow Wilson
Foundation from 1990 to 1993. Between 1994 and 2000 he was a member of the
advisory board of the Salvation Army School for Officers' Training.
Pichler served on the boards of directors of Tougaloo College and the
Cincinnati Opera. In addition, he served on the board of the Cincinnati
Center City Development Corporation and as chairman of its Over-the-Rhine
working group, dedicated to revitalizing a historic but blighted
Cincinnati neighborhood. In 2000 Pichler and his wife donated $1 million
to Cincinnati inner-city Catholic elementary schools.

A board member of the National Alliance of Business between 1988 and 1996,
Pichler served as its chairman from 1991 until 1993. He also chaired the
Cincinnati Business Committee in 1997 and 1998 and served as a trustee of
the Greater Cincinnati Chamber of Commerce and a member of the Business
Roundtable. Pichler was a member of the board of directors of Cincinnati
Milacron and Federated Department Stores.

THREATENED BY WAL-MART

By the end of 2001 Kroger was forced to begin slashing prices to compete
with Wal-Mart and other superstores. Pichler announced a new strategic
growth plan, investing in pricing, promotion, and acquisitions of
additional chain stores. He further increased Kroger's pharmacy
business, and the company became the world's largest florist.

However, Kroger continued to lose market share to Wal-Mart. In 2002
Pichler again undertook major cost cutting, further centralizing
procurement and distribution and eliminating some 1,500 jobs. His
budget-trimming strategy enabled Kroger to lower prices on some goods and
to maintain or increase market share against superstore competitors.

In 2004 Kroger remained one of the biggest grocery store chains in the
country, with fiscal 2003 sales of $58.3 billion and 2,530 supermarkets
and department stores in 32 states. In addition to grocery and
multidepartment stores, the company owned convenience stores and mall
jewelry stores. Kroger operated under nearly two dozen different banners,
including Quality Food Centers, Food 4 Less, Fred Meyer, and Kwik Shop.
The company was first or second in sales in 41 out of the 48 major
American markets it operated in.

Pichler consistently made
Forbes
magazine's list of corporate America's most powerful
people. In 2003 he received $6.3 million in compensation in addition to
stock options. Pichler retired as CEO of Kroger in 2003. As he approached
the mandatory retirement age of 65, he worked on long-term planning and
instituting a smooth leadership transition. He retired as chairman and
board member on June 24, 2004, and was replaced by CEO David Dillon.

See also
entry on The Kroger Company in
International Directory of Company Histories
.

sources for further information

Berss, Marcia, "Cash Flow Joe,"
Forbes
, June 6, 1994, p. 47.

Bjorhus, Jennifer, "Alliance Born of Friendship: The
Kroger–Fred Meyer Merger CEOs Began Sharing Ideas and Strategies
Five Years Ago,"
Oregonian
(Portland), October 25, 1998.